Privatization breeds energy poverty

By Liu Ming-te and Tsai Hsi-yi 劉明德，蔡欣嶧

The term “energy poverty” traditionally refers to developing countries in Africa and elsewhere where access to energy is a problem. People living in these countries lack access to electricity and other energy sources and cannot connect to the Internet, watch television, use mobile phones, heating or air conditioning. They lack the most basic amenities and that is the reason why the US weekly magazine

Time said in an article in October last year that energy poverty is the worst kind of poverty.

Data show that about 1.6 billion people around the world suffer from energy poverty. This phenomenon is now gradually expanding into the developed world.

One example of this is the UK, where 7.8 million people — one-eighth of the UK’s population — live in energy poverty. The reason this group of people do not have access to fuel, electricity and other energy sources is not a lack of infrastructure, but because energy prices are so high that they cannot make ends meet and therefore have to choose between paying for energy or paying for food. The luster has gone out of the empire on which the sun never set.

Aside from the UK’s economy performing badly in recent years and national income falling, the main reason for the rise of fuel poverty is that the UK has gone too far in its privatization of state-owned enterprises (SOEs).

In particular, the privatization of daily necessities such as fuel, electricity and running water has resulted in commodities prices becoming “normalized” and market-oriented. This in turn has caused prices to go up across all sectors, making life increasingly difficult for the public.

Why has privatization caused commodity prices to go through the roof? This is easily explained by examining countries with privatized electricity sectors.

According to last year’s annual report from Taiwan Power Co (Taipower), the average annualized price for 1kWh of electricity is US$0.1496 in Germany, US$0.1506 in Spain and US$0.1716 in the UK. In Taiwan, where the sector has not been privatized, the price is US$0.0797.

After the UK amended its Electricity Act in 1989, electricity companies have proliferated, and together they offer over a thousand different ways to calculate the cost of electricity. Even in Germany, more than 7,000 different formulas for calculating electricity costs exist since the electricity sector was privatized and prices skyrocketed.

Due to the excessive number of cost calculations, it is difficult for the public to compare prices to find the best solution, with the result that many people pay too much for electricity. This is the result of privatization and explains why in the UK, which has been continuously privatizing state owned enterprises since the days of former British prime minister Margaret Thatcher, people cannot afford their energy bills. It is thus not surprising that energy poverty has appeared in the UK. After 30 years of this approach, it is clear that privatization of state owned enterprises in basic amenities is not a good strategy.

The Taiwanese government’s plan to privatize Taipower remains in place even though there has been a change of ruling party. Despite attracting severe criticism over the recent decision to allow an increase in electricity prices, the government continues to push forward with this plan. This is reckless and irresponsible and does give consideration to the consequences.